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Elasticity and a curve of the mutual offer.



If to use the exact form of a curve of the mutual offer it is possible to analyse it in the tideway of the general concept of elasticity. Unlike the general elasticity, elasticity of a curve of the mutual offer is equal to elasticity of demand for import along a curve and is defined as percentage change of quantity of import demand, delennoe on percentage change in the relative price of import (though there is also other definition). This definition is analogue of usual definition of price elasticity of demand. An exception


R
R
Rice 8. Elasticity of demand for import lengthways offer curve is that it is defined on the basis of the relative prices instead of absolute monetary indicators.
Elasticity of import demand of a curve of the mutual offer is defined as distance OR, delennoe on distance OS. As a result in a part elasticity in ^R shows, that the curve is elastic, since OR> OS, i.e. OR/OS> 1; in a part offer curve it is not elastic, since OR/OS <1; in a part) the curve has individual elasticity, since OR/OS=1, t.o. offer curve it is usually represented consisting of 3 parts.
When the country is in an elastic part it means, that the given percent of changes in the relative prices for the imported goods will lead bolshemu to percentage change in quantity of acquired import.
When the country places in not elastic part it means, that the given percent of change in the relative prices for import will lead to smaller percentage change of quantity of import (fig. 8).
As export is analogue of the general expenses, the form offer curve can be treated the same as elasticity literally.
According to drawing 9, on plot OV (on a curve of the mutual offer) changes in terms of trade (for example, from (Rh/Ru) 1 to (Rh/Ru) 2) are accompanied by reduction of prices on U.Sootvetstvenno the country 1 aspires to consume more j demand on At is elastic, propensity to trade and export increases with 1 to 2. Directed upwards in this elastic part offer curve means, that reduction of prices on the import goods is accompanied by sale bolshego volume of export for acquisition bolshego import (therefore the country moves from the item And to the item).

jm at Drawing E.
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2 1
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If the country is in not elastic part (fig. 9 see) it is presented by the part inclined back offer curve. We will assume, that the initial relative price (Rh/Ru) 4 crosses offer curve in t., and then increases to (Rh/Ru) 5 and it crosses offer curve in point G. It testifies that the relative prices for import have fallen, therefore the country aspires to acquire more import (increase with 4 to 5). But as demand neelastichen, the country is inclined
To expend it is less on acquisition At, that in a context offer curve means to reduce export which falls with 4 to 5.
At last, in case of individual elasticity in ^V - "watershed" between elastic and not elastic parts of a curve.
At very small change of the prices from ^V or at the big change of the prices if we have vertical offer curve, there will be no changes in quantity export 3. Accordingly there will be no changes in expenses for import.
Unusual line, characteristic offer curve, is the part of this curve inclined back. It is possible to give some explanations of the economic behaviour corresponding to these various indicators of elasticity. We will shortly present one such explanation that the best to present that occurs, if terms of trade are changed also the country moves along a curve of mutual demand. When price H grows concerning the price At, parity Rh/Ru and a line of terms of trade grows becomes more abruptly, consumers of the country 1 will aspire to change their purchases from goods H to the goods At since it becomes rather cheaper. So, as a result, the more H will be available for export, the less local consumers will wish to consume H.Etot's goods a substitution effect serves to make offer curve directed upwards since with other things being equal the increase in the prices on H associates with growth of quantity exported H.
When price H grows concerning the price At, manufacturers of the country 1 will aspire to make more H and less At, that the industrial effect is defined by possibility of higher yield in production H in comparison with U.Etot strengthens a substitution effect as soon as with increase in production H the increasing quantity H will be directed for export. Therefore the industrial effect, with other things being equal, also tends to do offer curve directed upwards when rather more heavy prices on H stimulate bolshy volume of export X.
At last, when the prices for goods H grow concerning the prices for the goods At, clearly, that the real earnings of the country 1 raise, since the goods, which it directs abroad (), give rather big profit whereas the goods purchased abroad, became rather cheaper. As a result of real earnings growth that became a consequence of change of the relative prices, the country 1 will aspire to acquire more both goods H, and d's goods, acquisition of goods H as a result of real earnings growth reduces number of goods H intended for export. Therefore the income effect or effect of terms of trade works in an opposite direction in comparison with a substitution effect and effect of production.
When the effect of replacement and production is together stronger, than the income effect, offer curve has the inclination directed upwards or a "normal" kind. However, if the income effect prevails over two others, offer curve will have a part with a worsening inclination or an inclination back. It is obvious, if the income effect simply corresponds to two other effects, offer curve will be vertical and will have individual elasticity. In the end, the form offer curve - a question empirical.
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Elasticity and a curve of the mutual offer.

  1. elasticity Application offer curve to terms of trade and trade volume.
    In the given question two situations when elastic offer curve it can be important for definition of influence on economic events are discussed. Fig. 10. Influence of economic growth on trade. imY Let's assume, that 1 - offer curve our country prior to the beginning of growth; OS, ' - as a result of growth. Initial terms of trade - THAT 1, a point of trading balance - E.Ekonomichesky growth
  2. Elasticity of a supply and demand
    Elasticity of demand Elasticity of demand defines change of a level of demand on separate kinds of the goods depending on the factors forming this demand (the prices for the goods, level of incomes, etc.). The various goods differ from each other on degree of reaction of a supply and demand on price change. We will consider three variants of a curve of demand (drawing 7). {foto10} And in Drawing
  3. Questions for self-examination
    About what speak supply and demand laws? How balance in the goods market is reached? Transfer the factors influencing demand of the population on the goods and services. Name the factors influencing the market offer of the goods and services. Under what conditions the demand law does not act? Result own examples of various variants of demand in your region. Show, on what of formulas it is
  4. Elasticity of the offer
    Elasticity of the offer is an indicator of relative change of quantity of the goods offered in the market according to relative change of a competitive price. The factor of elasticity of offer E s p represents the relation of change of the offer to the change which has caused it of the price: In drawing 8 three lines of the offer with different elasticity are shown. {foto12} Drawing 8 - Various
  5. the Factor of elasticity of demand
    shows, on how many percent the size of demand for the goods as a result, changes of its price for one percent varies. When decrease, the prices exactly is compensated by corresponding growth of demand, so that the general gain remains invariable - drawing 7 () it is possible to speak about individual elasticity of demand E d = 1. When price cut causes smaller growth of demand - drawing 7 (),
  6. 5.2. Concept of elasticity and its kinds
    Supply and demand depend on many factors. Their change attracts supply and demand respective alteration. The concept of elasticity also is connected with it. Elasticity - a measure of reaction of one economic variable on change other. In an economic theory consider elasticity of a supply and demand. Elasticity of demand for the goods - this percentage parity between change in the price or the
  7. Stability of the markets of a foreign exchange.
    The stable market of a foreign exchange exists when any deviation from an equilibrium rate causes automatic forces which return a rate of exchange again to equilibrium level. The astable market of a foreign exchange means, that any deviation from balance withdraws a rate of exchange all further from equilibrium level. Stability exists when the curve of the offer of a foreign exchange has a
  8. CONTROL QUESTIONS AND TASKS
    That it is necessary to understand as the market? Name subjects and objects of market relations. What includes concept a market infrastructure? What it is necessary to understand as elasticity of demand? What it is necessary to understand as elasticity of the offer? Than the top and bottom limits of a market price are defined? Result examples when the theory of elasticity of a supply and demand
  9. 8.6. Price elasticity of demand for the goods
    Demand for the goods differently reacts to changes of their prices, the prices of other goods and incomes of consumers. Price elasticity of demand for the goods shows, on how many items (protsenktov) the volume of demand for the goods is changed at change of its price (the price for other goods connected with the first goods; the income of the consumer of the given goods) on one item (proktsent).
  10. Adaptation of the prices in the conditions of flexible rates of exchange.
    Adaptation Process. We will consider, as there is a process of restoration of a market equilibrium (adaptation) by means of the mechanism of change of the prices. As an example we will agree with the following: there are only two countries (for example, the USA and the Great Britain; between them there is only an exchange of the goods and there are no capital streams; the curve of a supply and
  11. Moving of curves of the mutual offer.
    Any curve of the mutual offer is "photo" of any moment of time. However with the course of time changes are possible. Let's assume, that after the reached balance consumers of the country 1 have changed tastes and have decided, that they could consume U.Poskolku's more goods it is the imported goods, it will be increased by demand for import, i.e. the country 1 will have more desires to trade and
  12. 7.6. Concept of the offer and the factors causing it of change
    Demand is one party of market relations, as other party the offer acts. The offer is a quantity of the goods which manufacturers can and wish to make and offer to sale in the market under the concrete price during the certain period. With reference to a concrete situation the offer, as well as demand, it is possible to present in the form of tab. 7.2. Apparently from tab. 7.2 if the price per
  13. Degree of elasticity of demand
    (the factor of elasticity of demand depending on the price) E d p represents the relation of change of demand to the change which has caused it of the
  14. Change of other production costs
    Change of cost of used technologies and raw materials (so-called shocks of the offer) also can cause displacement of a curve of an aggregate supply. The negative shock of the offer, such as a rise in prices for raw materials (for example, oil), means growth of production costs and conducts to displacement of a curve of an aggregate supply to the left. The positive shock of the offer, such as an
  15. 7.4. Elasticity of a supply and demand
    Elasticity reflects dependence between demand and the prices; between the offer and the prices; between the prices and wages. It shows speed of reaction of demand or the offer on change of the prices. Elasticity of demand under the price or elasticity factor is measured as the relation of change of demand in percentage to price change in percentage. Where EA - factor of elasticity of demand
  16. 3 Determination of the price on the basis of an estimation of demand for the goods.
    3.1 Method of the analysis of factor of elasticity of demand. According to the given method, level of the price for the goods is put in dependence on demand change. The high price is installed when demand is rather great, while reduction of price is accompanied by demand decrease. The factor of elasticity of demand which measures extent of sensitivity of users to change of the price of products
  17. Displacement of a supply curve of bonds
    In displacement of a supply curve of bonds can result such factors: Expected profitableness of investments; Expected inflation; Activity of the state bodies. Let's consider, how the supply curve of bonds is displaced at change of each of these factors (and invariances of the others). In help tab. 5.3 influence of changes of these factors on a supply curve of bonds is is short described. Help
  18. 4.1.6. An efficiency line
    In the market many securities address. Explain, why the efficiency line consists only of northern branch of curve transformation. Recognise that risk of a valuable paper with lower profitableness less, than risk of a title with the biggest profitableness. The efficiency line is a geometrical place of all dominating positions "profitableness-risk". We speak About dominating positions when it is
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